American Airlines, Inc. v. Wolens

In American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995), a class of participants in an airline's frequent-flyer program filed an action alleging that the airline had breached its contract with them. The class plaintiffs also alleged that the airline had breached an Illinois consumer-protection statute. The Supreme Court, on the authority of Morales, held that the statute-based claim was preempted. The airline argued that because the A.D.A. had transferred some of the C.A.B.'s oversight functions to the U.S. Department of Transportation ("D.O.T."), the D.O.T. should resolve disputes between airlines and their customers. In other words, the airline argued that the effect of the A.D.A.'s preemption clause was that state courts could not hear breach-of-contract claims. The Court concluded that the plaintiffs' complaint did "relate" to the airline's rates. However, it also concluded that pursuing the class's breach-of-contract claim in a state court did not amount to "enforcement of any law, rule, regulation, standard, or other provision having the force and effect of law," 513 U.S. at 229, as the revised preemption clause prohibits. The Court held that the preemption clause did not "shelter airlines from suits ... seeking recovery solely for the airline's alleged breach of its own, self-imposed, undertakings. ... Terms and conditions airlines offer and passengers accept are privately ordered obligations ...." 513 U.S. at 228-29. Thus, the Court concluded "that the A.D.A. permits state-law-based court adjudication of routine breach-of-contract claims." 513 U.S. at 232. The Court further explained: "The A.D.A.'s preemption clause, 1305(a)(1), read together with the 1958 Act's saving clause, stops States from imposing their own substantive standards with respect to rates, routes, or services, but not from affording relief to a party who claims and proves that an airline dishonored a term the airline itself stipulated. This distinction between what the State dictates and what the airline itself undertakes confines courts, in breach-of-contract actions, to the parties' bargain, with no enlargement or enhancement based on state laws or policies external to the agreement." 513 U.S. at 232-33. American Airlines, Inc. v. Wolens, involved state law consumer fraud and breach of contract claims arising from retroactive changes in an airline's frequent flyer program. Id. at 224-25. The Court focused on another portion of the ADA's preemption clause -- the phrase "enact or enforce any laws" -- to determine the ADA's preemptive scope. Id. at 226. It held that, like the guidelines at issue in Morales, Illinois's consumer fraud statute "served as a means to guide and police the marketing practices of the airlines." Id. at 228. Thus, the ADA preempted the plaintiffs' consumer fraud claims. Id. The Court then turned to the plaintiffs' breach of contract claims. Id. It held that the ADA's preemption clause did not shield airlines from "suits alleging no violation of state-imposed obligations, but seeking recovery solely for the airline's alleged breach of its own, self-imposed undertakings." Id. at 228. The Court reasoned that some of the terms and conditions airlines offer, such as frequent flyer programs, are private obligations and do not amount to State "'enactment or enforcement of any law, rule, regulation, standard, or other provision having the force and effect of law' within the meaning of section 1305(a)(1)." Id. at 228-29. The Court limited its holding, however, to suits based on the terms of the parties' bargain "with no enlargement or enhancement based on state laws or policies external to the agreement." Id. at 233. In Wolens, the Supreme Court determined that a frequent flyer program was a self-imposed undertaking between private parties and was therefore too tenuous or peripheral to constitute state enforcement. 513 U.S. at 228-29. In deciding whether contract claims are preempted, the Court distinguish between obligations dictated by the State and those voluntarily undertaken by the airline. Wolens, 513 U.S. at 233. When parties privately negotiate a contract's terms and then sue in state court for breach of those terms, there is generally no specter of state- imposed regulation. Id. at 228-29. The Supreme Court held that "the ADA's preemption clause ... read together with the ... saving clause, stops States from imposing their own substantive standards with respect to rates, routes, or services" (id. at 232), but that the ADA does not preempt routine breach of contract claims since these "suits allege no violation of state-imposed obligations, but seek recovery solely for the airline's alleged breach of its own, self-imposed undertakings" (id. at 228). The "terms and conditions airlines offer and passengers accept are privately ordered obligations" which do not amount to a state's enforcement of any rule or standard (id. at 228-229). The Supreme Court stated that "this distinction between what the State dictates and what the airline itself undertakes confines courts, in breach-of-contract actions, to the parties' bargain, with no enlargement or enhancement based on state laws or policies external to the agreement" (id. at 233).